Information from Zoopla highlights how the the housing market is now shifting to a buyers’ market, with an increase in homes being put up for sale, creating greater opportunities and choices for buyers. According to their latest House Price Index, sellers are now accepting offers on their asking prices, indicating a willingness to negotiate on price.
Supply of Homes for Sale Increases
Compared to last year, there has been a 60% increase in the stock of homes for sale due to slower sales and a steady flow of new supply. On average, an estate agent office now has 24 homes for sale, compared to just 15 a year ago.
Sellers Lowering Asking Prices
The trend of sellers lowering their asking prices to achieve a sale has resulted in a shift in power to buyers. On average, sellers are now lowering their asking prices by £14,100 to secure a sale. This trend is observed across all regions and property types.
Mortgage Rates Affecting Buying Power
Higher mortgage rates are affecting buying power. Even at 4% mortgage rates, the average home buyer has 20% less buying power compared to a year ago when rates were at 2%. This means buyers will have less to spend when purchasing a new home as more of their mortgage repayments will be going towards interest.
Impact on House Prices
The impact of higher mortgage rates on house prices is not direct. Some buyers will opt for smaller or cheaper homes to make up for the 20% shortfall in buying power. Others may inject more equity into their purchases or be in a position to spend more on mortgage repayments.
Future Market Expectations
We expect to see small price reductions month on month as the soft correction in house prices continues. By summer, modest annual price reductions of up to 2-3% are anticipated. However, the housing market is adjusting to higher mortgage rates better than expected and some of the larger price drops predicted across the industry likely won’t come to pass. The availability of more rates for new buyers in the 4-5% range and even lower indicates that competition among lenders will remain strong and will still be attractive deals for borrowers. Popular industry view has always been that 4% mortgage rates are manageable and consistent with very low levels of house price growth or price falls in real terms – Which should ensure that the overall property market lands softly.